M/S. MAURI YEAST INDIA PVT. LTD. versus STATE OF U.P. AND ANOTHER

Citation: [2008] 6 S.C.R. 131 · Decided: 10-04-2008 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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[2008] 6 S.C.R. 131 
MIS. MAURI YEAST INDIA PVT. LTD. 
\I. 
STATE OF U.P. AND ANOTHER 
(Civil Appeal No. 2720 of 2008) 
APRIL10, 2008 
[S.B. SINHA AND HARJIT SINGH BEDI, JJ.] 
Uttar Pradesh Sales Tax Act-Notification dated 7. 9. 1981 
""" Entry 21 - Yeast liable to duty as a chemical and not as an 
unclassified item. 
Tax/Taxation: 
Two views - Held: One which favours assessee to be 
adopted. 
A 
B 
c 
Classification accepted by revenue for long time - Onus D 
on revenue to show classification under different heading -
Plea that under s.101 Evidence Act, onus would be on 
assessee cannot be accepted as provisions of Evidence Act 
not applicable. 
Interpretation of statutes - Fiscal statute: 
Interpretation of word - Trade or commercial meaning or 
end user context relevant factor for interpreting a word. 
E 
Classification of goods - Conflict between two entries -
One leading to opinion that goods fall under the purview of a 
F 
particular tariff entry and another under the residuary entry -
Held: Former should be preferred - Doctrine of 'Executive 
Construction'. 
Legislation: Issuance of Notification - Executive act of 
issuing Notification - Held: Is a legislative action. 
G 
Appellants were carrying 
on 
business of 
manufacturing and sale of yeast which was used for the 
purposes of manufacturing bread etc. They had been filing 
131 
H 
132 
SUPREME COURT REPORTS 
[2008] 6 S.C.R. 
A returns before the sales tax authorities treating 'yeast' as 
'chemical' within the meaning of the Entry 21 of 
Notification dated 7.9.1981 issued under U.P. Sales Tax 
Act for a long time. The said returns were accepted and 
orders of assessment were passed relying on or on the 
B basis thereof. 
On 10.3.2005, Assessing Officer rejected the 
classification of sale of 'yeast' under the head 'chemical' 
and imposed tax thereupon treating the same to be as 
'unclassified item'. Appeals thereagainst were dismissed 
C by Appellate authority and the Tribunal. On that basis, 
notice was issued to appellant to show cause as to why 
tax be not imposed on sale of yeast @ 10% as an 
unclassified item. Writ petition was filed, which was 
D 
dismissed. Hence the present appeal. 
Allowing the appeals, the Court 
HELD: 1. 'Yeast' is a chemical. Chemical is defined 
as compound of substances of definite molecular 
composition. If 'yeast' has a definite molecular 
E composition and is a single molecular species with a 
definite molecular structure, it would answer the said 
description. 'Yeast' has all the trappings of a chemical. It 
has a definite composition or attributes of the properties. 
A 
bye-chE~mical substance for the purpose of 
F interpretation of an entry in a fiscal statute may also be 
held to be a chemical. [Paras 38,39] [152-D-F] 
2. The chemical composition of yeast as also its 
chemical formula stand accepted by the respondent. The 
yeast is mixture comprising of Ammonia, Diammonia Acid, 
G Mono Ammonia Acid, Phosphorous Pentaoxide, 
Potassium Oxide, Mangesium Oxide, Calcium Oxide etc. 
In dried form, the yeast consists of Carbon 46 %, Oxygen 
32 %, Nitrogen 8.50 %, Hydrogen 6.00 %, Ash 7 .50 %. It 
also stands admitted that yeast is also used in baking, 
H pharmaceutical industries and for domestic applications 
MIS. MAURI YEAST INDIA PVT. LTD . .v. ST~TE OF U.P. 
133 
AND ANOTHER 
.. 
such as in bread making process. Yeast ferments simple A 
sugar and produces carbon dioxide and alcohol. It is 
capable of bringing about a chemical reaction or chemical 
effect. (Paras 12, 13] (140-E, H; 141-A] 
Concise Oxford Dictionary (1 Oth Indian Edition); 
Encyclopedia Americana; Bakers Handbook on Practical B 
Baking compiled by U.S. Wheat Associates, New Delhi; 
Webster's Seventh New Collegiate Dictionary; Encyclopedia 
Americana (International Edition) Vol. 29 - referred to. 
3. In the year 1998 the rate of tax was increased from c 
8% to 10%, whereas in the year 2003 it was brought down 
to 4%. Strangely enough from 1981 to 2003, no attempt 
was made to classify 'yeast' as a residuary item. 
Submission that the rate of tax being the same, it was not 
necessary to do so cannot be accepted, as from 1998 to 
2003 the rate of tax was 10%. It is now a well settled D 
principle of law that in interpreting different entries, 
attempts should be made to find out as to whether the 
same answers the description of the contents of the basic 
entry and only in the event it is not possible to do so, 
recourse to the residuary entry should be tak
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